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LEVERAGED CAPITAL NEWSLETTER Leveraged Capital, is a free monthly newsletter that presents growth and strategy issues effecting entrepreneurs and owners of small to medium size enterprises (SME's). Leveraged Capital is published and delivered electronically to subscribers. Your privacy is strictly respected and we do not share or sell subscriber email addresses to anyone outside of Graham Financial Corporation. If you enjoy what we present, please forward a copy of Leveraged Capital to clients and associates. They can subscribe to Leveraged Capital, by clicking on this link: http://www.GrahamFinancial.com/newsLetter.htm and filling out the quick form.
Some what of a wild and wacky month (again) behind us in the markets. Monday is President's day - I sure would like to know what George W. is thinking on the eve of a day that has so much history and legacy attached to it and with so much of his legacy that will be shaped and decided in the coming weeks. Much thought has been given this month to just what is happening economically in North America, with so much money sitting out there waiting for better deals. Refusing to sit on our money and watch deals from the side-lines, we are looking at expanding more business south of the border, but more on that next month. Much (long-term)
success to you, DPG.
14 Years of Exceptional Service Contact Nikki Barnett (416) 367 - 1055
In This Months Issue: (Click on the Article Title To Go To The Full Story.)
Quote Of The Month: Investment Hindsight:
Perhaps
no other economic change has so consumed Americans than the emergence of big
business in the 19th century. As the invisible hand of the marketplace gave way
to the visible hand of management, output rose, prices fell, and the United
States became an economic powerhouse. This process also fundamentally changed
the nature of the relationship between business, businessmen, individual
citizens, and their democratic system of governance. Big business concentrated
wealth and power, and manipulated the streams of commerce in ways that seemed
antithetical to the political rhetoric of Jacksonian Democracy. Technical
discussions associated with the management of large, vertically integrated
enterprises were thus matched with a passionate debate regarding the equitable
relationship between capitalism and democracy. Railroads, the nation's first big
business, were at the center of these debates since they embodied massive
concentrations of capital and constituted the lifeblood of many communities.
While many scholars have studied parts of the railroad revolution, few have
attempted to integrate all of the multifaceted effects of this process. John
Lauritz Larson, an associate professor of history at Purdue University, provides
just such an integrated account in Bonds of Enterprise. Larson examines the
career of John Murray Forbes (1813-1898), whose life spanned the very different
worlds of personal, market capitalism and "visible-hand" big-business
management. Like a spider at the center of a web (although Larson would probably
eschew such a malevolent analogy) Forbes touched all of the varied aspects of
the "railroad question." As Larson points out, this book is not so
much a biography as it is a selective depiction of Forbes' role in developing
the "bonds of enterprise" that linked both cities and competing
interest groups to each other. Thomas McCraw used a similar approach in Prophets
of Regulation, linking four notable individuals to the regulatory mechanisms
that they hoped to create. While Bonds of Enterprise may not garner the same
degree of notoriety, it is still a fascinating and important work. While still a
young man, John Murray Forbes earned his fortune in the China trade. He relied
heavily on the standard pillars of long-distance capitalism in the early 1800s;
family connections and trust backed by an impeccable reputation. By the 1840s,
Forbes settled into what he believed would be a respectable semi-retirement and
he invested heavily in railroad securities. Perhaps
the pivotal moment in Forbes' career occurred in 1846 when he acquired control
of the moribund Michigan Central Railroad, a state-owned project that typified
the internal improvement mania that had arisen before the Panic of 1837. Like
most such rail and canal projects, the state initially envisioned the Michigan
Central to be solely a trunk line designed to encourage general commercial
development. Private entrepreneurs would then construct feeders to the mainline,
allowing, in a very Jacksonian fashion, all of the common men equal access to
the economic potential of the railway. Forbes
increasingly saw the economic function of the railroad in quite a different
light. He realized that only a combined branch-and-trunkline railroad could earn
a satisfactory profit, and he felt that railroad development should proceed
gradually and sequentially, allowing each region of the frontier to develop
before proceeding to the next. In the process, the railroad must inevitably
change transportation patterns in the region that it served causing some
regions-and some individuals-to prosper, and others to fail. Like many 19th
century entrepreneurs, Forbes had only the haziest idea of the competitive
forces that America's first big business had unleashed. He was, however, deeply
troubled by his role in this process. He had grown up in, and attained wealth
by, a system of personal capitalism. He professed a life-long belief in the
limitless potential of a virtuous citizen in a democratic society. Yet, like
Henry Ford nearly a century later, he helped to bring about massive economic and
social transformations that, within his lifetime, helped to shatter the moral
principles that he held dear. Forbes
and his associates plunged into the "system-building" phase of
railroading during the 1850s. No longer advocating a sequential approach to
railroad expansion, Forbes increasingly saw railroads as essential to the
economic development of the West. As he pieced together the Chicago, Burlington,
and Quincy system, Forbes preferred to maintain the fiction of local control as
long as possible, relying heavily on home-grown investors and managers. While
this method allowed local entrepreneurs to assume many of the risks and enabling
the Boston capitalists to expropriate all of the rewards, Larson does not see
this as a stain on Forbes' exemplary business ethics. Nor does he blame Forbes
for any of the relatively mild financial machinations associated with the
Burlington; these he lays at the feet of James F. Joy and other unscrupulous
financiers who abused Forbes' trust. As
farm prices fell after the Civil War, farmers in Iowa protested rate
differentials and other types of "unfair" competition. They believed
that a lack of competition had caused these problems, while Forbes and other
system-builders increasingly understood that overbuilding and excess competition
were to blame. Forbes believed that he was advancing the cause of progress by
opening up the West and by increasing the general welfare through his business
enterprises. He seemed genuinely astonished that the seemingly ungrateful
beneficiaries of his efforts depicted him as a profit-hungry robber baron.
Perhaps because Forbes' "style of business was paternalistic, and his
patient efforts to develop the Iowa country had been met with hostility,"
(p. 142) he responded with a stubbornness that seemed to veer between puzzlement
and outrage. For example, the Burlington deliberately inflamed the passions of
westerners by raising long-haul rates to conform to Iowa
rate-equalization-legislation. Forbes thought that grandstanding populist
politicians like Iowa governor William Larrabee were ignorant of the
fundamentals of railroad economics; Larrabee was determined to fight "a war
against the arrogance of 'experts' who scorned the authority of popular
government." (p. 187) Forbes believed that, in the end, only railroad
officials could adequately understand the complexities of rate-making, and could
thus capture, or at least reduce, the deleterious effects of state and federal
regulation. Ultimately,
Larson's biographical approach strikes very near his target, but it is not quite
a bullseye. The reader is left with a thorough knowledge of Forbes' career, of
the railroads that Forbes controlled, and of the regulatory problems that
affected those railroads. Clearly, Forbes brought together many of the disparate
threads that connected all of the institutions and all of the historical actors
associated with the transformative effects of railroads on American life. But
there were also many currents that swirled and eddied far from the gaze of that
Boston-based Midwestern railroader. There is no doubt that Forbes was a pioneer;
whether or not he was typical is another matter. Portions
of Larson's analysis seem rather quaint and outdated. Bonds of Enterprise
originally appeared in 1984, and has now been reprinted with a short additional
introduction and amended bibliography. Still, this book employs scholarship that
is nearly two decades old. Scholars such as Gabriel Kolko figure prominently in
the original bibliography, even though their findings have been superseded by
more balanced research efforts. Larson seems needlessly stereotypical in his
descriptions of "the squalid poverty of the Chinese" (p. 11) and
"that exquisite pride of Oriental leisure." (p. 17-18) Nor can we be
positive that "Forbes seemed to thrive on tension." (p. 23) And, it
may be giving Forbes too much credit to suggest that, "He generated a model
for developing the vast interior of the United States, and he adapted or
invented many of those instruments of corporate enterprise with which
industrialists and financiers revolutionized American life." (p. 169) Larson's
obvious enthusiasm for his subject does not detract from the value of this book,
however. On the contrary, Bonds of Enterprise is a beautifully written and
superbly organized account of a pivotal time, and a pivotal person, in the
history of American business. Historians of the 19th-century railroad industry,
of business-government relations, and of entrepreneurship will not discover any
startling revelations here. Certainly the work of scholars such as Naomi
Lamoreaux and Colleen Dunlavy has done more to advance our knowledge of these
issues. What the reader will find is an excellent overview of these issues in a
form that is readily accessible to people lacking expertise in these areas, as
well as to students in graduate-level, or even advanced undergraduate classes.
At a time when the history profession seems inevitably destined for
fragmentation, compartmentalization, and the study of minutiae, Larson is to be
commended for this synthetic work. Albert
J. Churella is an assistant professor in the Social and International Studies
Program at Southern Polytechnic State University in Marietta, Georgia. He is the
author of From Steam to Diesel: Managerial Customs and Organizational
Capabilities in the Twentieth-Century American Locomotive Industry (Princeton:
The Princeton University Press, 1998). Copyright (c) 2002 by EH.NET. All rights
reserved. All EH.Net reviews are
archived at http://www.eh.net/bookreviews
People,
on average, don't want the lowest price. You can verify this fact by noticing
that not everyone drives a Ford Festiva or a Hyundai. Did you know that in a
given supermarket, Coke and Pepsi combined outsell the store brand
cola by a margin of about 12 to 1? And unlike cars, there just isn't that much
difference between a Coke and a Big K Cola. People don't want low price, they
want low risk. Let me tell you what I mean. Let's say you're taking a road trip
and you want to eat lunch. You come to an exit in the middle of nowhere...with a
Bob's Burger Barn on the right side and a McDonald's on the left side. Where do
you go? You drive back over to the other side of the freeway to get to the
McDonald's. Why? Because even if you don't like McDonald's, at least you know
what to expect. It's very low risk. What
about store brand soft drinks? They might be really good! They could be
terrible! I don't know! Who cares, it's only 85 cents more to get the national
brand. And I know I like the national brand. Who knows what the off brand tastes
like...and besides, what if my friends laugh at me? Come on, what's this Hy-Top
Lemon Lime Soda? Where's the Sprite? Sprite! What a bargain at only 85 cents
more. Let me let you in on a little secret. You're more likely to be the Bob's
Burger Barn of your industry than the McDonald's. Now, don't take that as an
insult. You might actually be much better - that is, have a better inside
reality - than the McDonald's in your industry, but here's the point...the
customer doesn't know. It's a high-risk situation for him to try you out.
And for all you out there reading this and thinking, "Hey Rich, you got
this one wrong, we are the recognized leader in our industry. We are the
McDonald's." All I have to say is "Apparently not. If so, then do you
already have all the business you want or is there more to be had?" There's
always somebody out there who thinks that one of your competitors is
better than you are - and it could be any of the three types of competitors:
direct, indirect, inertia. But what's interesting is that most businesses, just
like Bob with the Burger Barn, figure that by just sticking their sign up on the
road with the combo meal specials on the marquee, so to speak, that they ought
to get their fair share of the business. I
was recently in the market for a new phone system for the corporate office. I
did my research and found a company that sold a product that I felt comfortable
with - and even though it cost what seemed to be a lot of money for a phone
system, it was still within our budget. If you've ever bought a sophisticated
business phone system, then you know it's not something that you just call up
and order out of a catalog. There's a fair amount of planning that goes into
getting everything squared away and ready to install. I went through this
process of negotiating, evaluating, and planning and finally had just about all
the details worked out and was ready to go ahead with the purchase. Right
at that point, I had a guy with another company call me and ask me if he could
give me a quote on a phone system. One of our account reps had helped this guy
with some advertising and when he found out we were buying a phone system, he
insisted that we should at least let him give us a bid. Hey, he'd spent money
with us so we ought to give him a shot, right? I'd never met the guy, but agreed
to let him stop by and introduce himself. When he got to my office, I was
shocked. I thought I had the missing identical twin of Rodney Dangerfield
standing in front of me. He had the same goofy look on his face as Rodney, plus
the wide collar Hawaiian shirt and gold chain necklace to complete the look. He
looked like he was late for a gig in a sleazy lounge in Vegas. I thought,
"Wow, this guy sells phone systems?" He told me that he appreciated
the chance to bid on the phone system and that if he couldn't beat the other
company's price by at least 30%, I shouldn't even consider doing business with
him. Out of politeness, I consented to his faxing me a proposal the next day.
The next day he faxed a quote for a different brand, and sure enough, it's about
30% less than the original vendor's. So who do you think I ended up buying the
phone from? The Rodney Dangerfield look-alike? Not on your life. I went with the
original system that cost 30% more - or in this case, several thousands of
dollars more. Why?
The risk was too high. Don't you wonder about a system that's 30% less expensive
than what everyone else is selling? Wouldn't that make you a little nervous? Do
you really want something as critical as your business telephone system to be
supplied by some weirdo selling off brand stuff? Of course not. Now,
I'm not saying you are a weirdo selling off brand stuff. I tell you that story
to make a point about people's aversion to risk. But realize this...because of
the confidence gap that we've talked about in the past, any time a customer does
business with you - particularly for the first time - there is a certain amount
of risk involved. In your business and in your advertising, the best way to
lower the risk is to lower the risk. We
worked with a client one time that sold a non-insurance health benefit card that
would allow a person to receive substantial discounts on dental, vision, and
prescription services. You're probably familiar with this type of product. They
sold the card for something like $13 a month or $150 for the year. And hardly
anyone bought it. The sales agents complained and complained about how nobody
wanted to buy this lousy card. Their advertisements got almost no response.
Well, that lousy card was actually a really good deal if people would use it.
They could save $300 to $800 a year depending on their use. But think about
it...how excited would you be to listen to some guy try to sell you some
lousy health benefit card for 15 minutes? Well, we tried and tried and tried to
convince them to give the card away so that it could be used FREE for 30
days...from the first time it was used. There's no way a guy could save less
than $25 or $30 when he used it and he could even potentially save over a
hundred dollars on the very first use. Either way, he'd more than pay for the
card for at least a couple of months if he'd just use the FREE trial. They
resisted and came up with all the reasons why financially it wouldn't work and
they couldn't do it. People
who can solve problems get paid really well. And people who recite over and over
all the reasons why things won't work are generally broke. Well, shortly after
that company quit the business, I saw that one of their competitors was indeed
giving away the card free for a month, so I called them and snooped around a
little and found out they were selling tens of thousands of new cards a month.
It's low-risk. Consider
the process someone goes through when hiring us as consultants to improve their
marketing results. We know that paying thousands of dollars and spending months
of time and energy on your business is an extremely high-risk proposition. We
would never just walk into someone's office and say "hire us, we're
good." Instead, we lower the risk substantially. In our initial mailers and
advertisements, we only ask a prospect to make one commitment: Request a free
audio program. They don't even necessarily have to call in and talk to a person.
They can just e-mail or fax a request. When they listen to the CDs, we then ask
them to make another relatively low-risk commitment - assuming they liked what
they heard on the free programs - attend a one day seminar. And at the seminar,
we go through hundreds of examples of marketing that lets the prospect see that
we really do know what we're talking about. At that point, hopefully, a prospect
has enough information to draw a conclusion that hiring us would be a smart
move. But it all starts with a low risk offer to request a free audio program. So
now, let's evaluate your situation: First, put yourself in your
prospect's shoes - a prospect who's never even heard of you - and take a quick
look at your advertisements. What is the risk in calling you? What's the risk in
doing business with you? Are they afraid that if you find out their name and
phone number that you'll send salesmen calling all the time? What can you do to
lower the risk? Is there some way you can get the prospect to experience your
product or service before he has to commit to buy? Can you guarantee or give a
warranty for the work? Can you guarantee it for even longer than you do now? Is
there more information you can give him ahead of time to help him make an
intelligent decision? Can you give him guidelines as to what to look out for
when buying in your industry...regardless of whether he buys from you or not?
Can you lead him to a website? That's one of the main benefits of a website. The
point is this: lowering the risk factor is an absolute MUST if you want to
engender confidence with your prospects. And if you can solve the risk factor,
you'll get paid for it really well. Reproduced with permission from the Monopolize Your Marketplace Newsletter. Copyright © 2003 Y2Marketing except where indicated otherwise. All rights reserved worldwide. http://www.y2marketing.com
Your entry strategy is
an important part of both your marketing plan and your overall export plan.
Putting it in place is just as important as choosing the right one. Whether you choose
direct selling, indirect selling or partnering to enter your target market, all
strategies are based on relationships. At the heart of any business venture are
people. While this fact is important in business generally, in international
trade it is emphasized by differences in culture and business practices.
Successful market entry depends on finding the right buyers, agents,
distributors and partners in your target market. Selecting a Foreign
Agent or Distributor This
checklist should be tailored to your own company's specific needs, as key
factors may vary with the products, services and countries involved. Answering
these questions will help you determine if prospective agents or distributors
meet your needs.
Source: Adapted with permission from
Western Economic Diversification Canada, READY FOR EXPORT: Building A Foundation
For A Successful Export Program Market
Contacts. Any market entry strategy requires establishing
primary market contacts for your company, either in person or through the
assistance of a landed representative. The
Canadian
Trade Commissioner Service helps new and experienced exporters that
have researched and selected their target markets. Companies who want to access
this service should first register with the World
Information Network for Exports (WIN Exports). Information
on Canadian companies residing in the WIN Exports database is accessed by the
Trade Commissioners to match the capabilities with the needs of prospective
foreign buyers and clients. Over 140,000 requests from foreign buyers are
received annually. WIN Exports is also used to identify Canadian companies for
participation in trade shows and missions. The
range of services that the Trade Commissioner Service offers include: §
Market Prospect - assessing your potential in
the target market §
Key Contacts Search - lists of qualified contacts §
Local Company Information - information on companies
identified in your research §
Visit Information - assistance in planning and
organizing a trip to your target market §
Face-to-face Briefing - consultation with Trade
Commissioner Service officers §
Troubleshooting - advice on handling business or
market access problems Trade
Shows and Missions. Preparing
for Trade Shows. To
learn about how to target, select and budget for an international trade show,
view this guide on ExportSource. Planning
a Business Trip Abroad.
For assistance in planning a business trip abroad, click
here. New
Exporters to Border States (NEBS).
For new exporters interested in the U.S. market, the NEBS
Program includes: a briefing on export services; an interview with a
trade officer at the Consulate; visits to U.S. Customs and a freight forwarder;
presentations by U.S. manufacturer's agent or distributor, U.S. Customs, a
customs broker, a freight forwarder, an immigration specialist, an accountant,
and a banker. Details
about NEBS and other Canada-U.S. trade programs, and a list of upcoming events
can be viewed at the Department of Foreign Affairs and International Trade (DFAIT)
United States Bureau web site. Visit the Buffalo
Consulate's Export and Investment site for more information on their
market entry assistance. You should also check with your provincial trade
department, since many NEBS missions are organized through them. Team
Canada Trade Missions. Perhaps
the most well-known trade missions for Canadian companies are the Team Canada Trade Missions. These missions, led by federal
and provincial premiers and trade ministers, have proven to be highly successful
in assisting market entry for companies of all sizes, or in expanding the
presence of Canadian companies already in the market. "Strength in
numbers" (over 400 organizations and companies participated on the 1998
mission to Latin America) draws considerable attention from the local business
community, providing Canadian companies immediate access to potential contacts
and information. Trade missions are also organized by the provinces and territories, regions, and private organizations. Your local International Trade Centre (ITC) or Canada Business Service Centre (CBSC) can provide information on upcoming trade missions, and how best to prepare. Team Canada Inc., and Industry Canada are not responsible for the accuracy, reliability or currency of information provided by external sources. Users wishing to rely upon this information should consult directly with the source of the information.
No matter what marketplace you operate in, people are looking for others who can equip them. They want creative enablers who are driven to re-engineer the status quo. They want direction. They want influence. They want champions of change. On March 28th, 2003 the Maximum Impact simulcast will deliver a remarkable day of training to over 100,000 leaders across North America. Proven winners in business, sports and organizational management, Ken Blanchard (author of Raving Fans and One Minute Manager), John C. Maxwell (New York Times best selling author of The 21 Irrefutable Laws Of Leadership), and Joe Gibbs (NASCAR Team Owner and former NFL Coach of 3-time World Champion Washington Redskins and author of Racing To Win) will share their experiences as instigators of effective change. For the Toronto / GTA Location Click here: http://www.bachurch.com/mi2003 or Contact D. Paul Graham (416) 368-0088. To find a location in North America near you click on http://www.maximumimpact2003.com .
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